The new paradigm

Point of No Return | National Debt Tops Personal Income

For the first time since World War II, the National Debt of the United States has exceeded personal income, on a per capita basis. The point of no return was breached in 2010, during Barack Obama’s second year in office, and the derangement continues to spin hopelessly out of control. This means that every dollar earned by an American citizen is now owned by the federal government, and then some. That’s right, the average annual income of most working-class Americans now belongs to the federal government. The warning of Thomas Jefferson has come to pass, “A government big enough to give you everything you want, is big enough to take away everything you have.”

Meanwhile, no senators voted for Barack Obama’s 2012 budgetwhen it came up for a vote in the Senate on Wednesday. A procedural vote to move forward on the president’s plan failed 0 – 97, proving that Obama is basically a lame duck president, with no viable plan for resolving the government-manufactured fiscal crisis.

Historical Per Capita National Debt, Personal Income and GDP

In the year 1929, per capita personal income was $697, while each citizen’s portion of the national debt was $139. The federal government’s debt represented just 16.3% of gross domestic product, and 19.9% of personal income. Although not incurring any national debt at all would have been ideal, the percentage of debt to personal income was at least somewhat bearable back in the day; but this was about to change for the worse.

The point where a citizen’s per capita share of the national debt exceeded personal income first occurred at the height of World War II. In 1944, per capita personal income was $1,199, while each citizen’s share of the national debt reached $1,452. At the time, the national debt represented 91.5% of gross domestic product and 121.1% of personal income, on a per capita basis. Per capita national debt would continue to exceed personal income through the end of 1950, five years after the end of the war.

The point of no return was decisively breached in the year 2010 (see chart above). Although per capita personal income had grown to $40,441, each citizen’s portion of the national debt soared to $43,732. The national debt represented 92.5% of gross domestic product and 108.1% of personal income, on a per capita basis. The situation has worsened through the end of the first quarter of 2011 with per capita personal income of $41,486, versus per capita national debt of $45,782. Through March of 2011, the national debt now represents 95.1% of gross domestic product and 110.4% of personal income, on a per capita basis.

[In contrast, at the end of 2008 per capita personal income stood at $40,469, while each citizen’s share of the national debt was $32,886. In 2008, the national debt represented 69.8% of GDP and 80.9% of personal income, on a per capita basis. Although the United States government was dangerously close in 2008, it had not yet surpassed the point of no return.]

This might not be as big of a deal if the United States ever paid down its debt, but I can only find six years since 1929 where this actually occurred – 1930, 1947, 1948, 1951, 1956, and 1957. There is no chance of fiscal recovery with a president who, in the face of financial disaster, dares to submit a budget containing multi-trillion dollar per year deficits into the future. Until the right leadership is in place, you, I, our children and our grandchildren can look forward to living in a nation which basically owns us. Is this the same Republic that we inherited from our forefathers? I think, not.

Barack Obama has taken this nation in precisely the wrong direction; he has taken us beyond the point of no return. Yet there is still hope, but such hope, of necessity, lies beyond the realm of partisan politicians. Faith without works is dead. This isn’t World War II. It’s time to dramatically reduce the federal government’s footprint. It’s time to cut government spending. It’s time to lower (not raise) the debt ceiling. Tomorrow will be too late.